Bulgaria booms while Turkey promises

With yields shooting to 12 per cent and capital gains staying high at 36 per cent, Bulgarian property investments yielded returns on cash invested of 116 per cent last year, property investment specialist Assetz has calculated.Its latest Property Investment Tracker puts Bulgaria ahead of Cyprus as the top yielding overseas investment destination in the first quarter of 2006.Deposit levels of 30 per cent are easily accessible to most investors as Bulgarian property remains relatively cheap, with a typical two bedroom apartment costing in the region of £80,000, said the firm.”Although the level of house price growth is expected to tail off slightly during the remainder of 2006, overall market growth will remain high, alongside excellent yields of 12 per cent in quality areas such as the ski resorts of Bansko and Bovorets.Cyprus is not far behind and offers a lower risk opportunity for investors. Low deposit levels of just 15 per cent are possible now and Swiss Franc mortgages are available with rates of just 3.25 per cent, making borrowing more affordable. Capital growth is likely to remain stable at around 15 per cent which, combined with rental yields of 8 per cent, results in a total of 84 per cent return on cash invested”.

Assetz also rate Turkey “interesting”. Mortgages are not currently allowed, but prices are still rising well, it said. “However prepare for a rule change in 2006 permitting borrowing that will ignite the market further”.

Although gains are still strong, with 27 per cent capital growth and 8 per cent yield, the change of rules concerning borrowing will have a dramatic effect on the housing market, potentially pushing up prices in key areas as much as 50 per cent in one year.

However, South Africa and the USA were given danger warnings. With interest rates rising in both countries, some investors must prepare to make a loss, particularly with new build in the USA, it said.

South Africa house price increases have slowed from 24.6 per cent to 15.8 per cent and the rate is likely to continue to fall. Mortgage rates, already 8.5 per cent are rising, prompting serious concern over the stability of the market. Yields have fallen from 10 per cent to as low as 5 per cent in 2005, so rental income will fail to make a profit for many investors.

“Overseas markets are still offering excellent opportunities for investors, with Bulgaria and Cyprus now overtaking some of the more established destinations in terms of total return on cash invested”, said Assetz managing director Stuart Law.

“However, investors should remember that high return is often associated with higher risk. Established locations such as France are still holding up extremely well against the competition, offering a total 68 per cent return on cash invested with an excellent holiday rentals market. With the low deposits requirement of just 15 per cent in France, the total return on cash is still exceptional at 68 per cent.”

‘Property in America is in a very tense state at present with conflicting statistics showing resilient existing home sales but collapsing new build sales volumes. The jury is still out on how safe it is to be investing in the States right now.

‘Cheap Bulgarian ski destinations are certainly in as much demand as quality resorts in the France Alps. However, for sunny destinations combined with quality investment returns I prefer the south of France and southern Cyprus to the coastal resorts in Bulgaria.

Bulgarian economic research company Industry Watch has also expressed some concerns over the outlook for the country’s property market.

Its figures put house prices up 21.6 per cent in the year to December. But with construction continuing at great pace, increased supply could see prices begin to level off, it said.

Given that prices in general are lower in the Black Sea resort of Bourgas than in Sofia, while construction is at a high level, the coastal town currently has the most overvalued property, said Industry watch. But Shumen, Rousse, Plovdiv and Pleven are currently undervalued, it believes.

Les Calvert is the owner of overseaspropertymall.com and many other property and travel related websites. Les writes news and articles on the overseas property market for leading websites, trade magazines and newspapers.